Self-executing 'smart contracts' could be beneficial to the professional sports world, eliminating disputes between players and either their clubs or third-party sponsors.
That's the view of Todd Byrne, a former professional rugby star with an interest in blockchain technology, as well as developers working to build a smart contract ecosystem that will they believe will remove time and cost pressures from the present justice system.
Smart contracts have to date been a theoretical concept, though rudimentary applications have begun to appear recently in the forms of 'prediction market' betting and futures contracts.
Byrne was a player for seven years in the National Rugby League (NRL), the premier professional rugby league in Australia and New Zealand. During that time, he played 104 games with the Sydney Roosters and New Zealand Warriors, before moving to the UK to play for two years and 24 games with Super League team Hull FC.
The situation in Australia
The NRL is one of Australasia's most popular and profitable sporting codes. Though TV broadcast rights were recently sold for over a billion dollars, teams themselves are limited in what they can pay players by a strictly enforced league salary cap.
This has led to some players seeking more lucrative deals elsewhere, sometimes even switching to rival codes of football.
Some players have been permitted to seek sponsorship deals outside their teams, called 'third-party agreements' or TPAs, for extra income. These are made with NRL approval, from sponsors affiliated or not affiliated with the players' teams.
Contracts commonly involve conditions like endorsements or appearances at a specified number of corporate and in-store events.
Non-team-affiliated TPAs, however, have had a tendency to go sour, with payment disputes arising from sponsors getting into financial difficulty, or accusations that players have not fulfilled their contractual obligations.
As a result of several high-profile disputes, many player agents now refuse to deal with TPAs altogether. Since teams have no obligation to get involved, players are often left to enforce the contracts by themselves – incurring unwanted time and cost struggles.
After spending a long time studying blockchain and smart contract technology, Byrne now believes he has a solution to this problem.
He envisages a contract signed by four parties: Player A, Sponsor B, NRL Administrator C and 'Block Oracle' D.
In the smart contracts world, an 'oracle' is a piece of software that scrapes the Internet for information, or is maintained by a trusted authority, to determine whether the terms of the contract have been met.
Byrne gives the example of Player A agreeing to a $50,000 per year deal with Sponsor B, who in turn asks for one in-store appearance per month from December to September.
Signed by all four parties, the contract is then uploaded to the bitcoin blockchain and is therefore verified and transparent.
The satisfying conditions created by the two parties could be a combination of: time-stamped/GPS-marked photos hashtagged and uploaded to Twitter, the sponsor's Facebook page and/or even to the blockchain itself (as 'proof of time spent').
The Block Oracle then verifies this data to an agreed-upon level of certainty, allowing the funds to be released to the player via the private keys of two of the three human participants.
The Block Oracle could be automated to release payment itself once it determined conditions were met, Byrne added.
“The contract becomes set-and-forget”
This obviates the need for the NRL administrator to act as a dispute mediator, a role they have been loath to play anyway. There would be no embarrassing scandals played out in public and media view, and neither the player nor sponsor would have the ability to dispute the outcome.
"The contract becomes set-and-forget," he said.
Auto-releasing funds to a bitcoin address would also cut payment processing time, fees, and labor costs.
There is further potential for blockchain-based smart contracts in other areas of sport as well, Byrne continued. One example would be incentive-based bonus payments, where a player is paid extra for on-field performance.
Automated oracles could scrape data on participation and scoring from a number of sources including local news services, the league's own news page and sports statistics sites.
Finding the 'pain point'
Speaking to CoinDesk, he said the first thing to look at when asking about the potential application of the technology is ,"What is the problem with the way it works now, and is there a concrete pain point?"
Disputes between professional sportspeople and third-party sponsors would definitely sound like something smart contracts could be useful for.
The aim is to streamline small claims cases where the facts are pretty straightforward, without needing to involve courts.
Smart contracts are not aiming to replace the legal system wholesale, he said, since that system is built to deal with a large amount of subjectivity.
"But there are a lot of cases where right now you'd have to go to court, and there'd be a lot of dispute – whereas if you had rules that the parties to the contract could trivially enforce, then it could take away some percentage of court cases."
Self-enforcing agreements could even exist alongside courts by determining who should pay legal fees for the action, taking away at least some of the stress for parties involved.
Emergence of an industry
Bitcoin developer Peter Todd tweeted in December that once the idea for smart contracts catches on, a new industry may emerge: oracles.
Conclusion of smart contract discussion: no-one has a clue what a smart contract actually is, and if we did it'd need oracles.
— Peter Todd (@petertoddbtc) December 5, 2014
The business opportunity here, continued Thomas, is for experts in a particular field to become a reliable information source, turning the intelligence they gather into machine-readable data ready for smart contract platforms to use.
Existing examples are sports tickers, companies that monitor broadcasts for appearances of corporate logos, companies like Bloomberg and Reuters that provide financial information services.
"You really need an industry insider to kick it off. A lot of smart contracts projects are struggling with that, because we're these generalists, crypto-geeks who can think of certain use-cases from our experiences, but there's a lot of fields we just don't know about."
In the case of sports, smart contracts could offer not only added support for those actively competing, but additional business opportunities as oracles for retired participants.
Technology already in place
Reality Keys, a Tokyo-based startup that builds interfaces between various information oracles and contract platforms, said the technology to perform functions like conditional bitcoin payments exists right now, and is ready to be implemented.
Founder Edmund Edgar said all that is required is an API that the system can pull from. His company, which launched over a year ago, is already accessing soccer scores via football-api.com, and is interested in adding more.
Parties could even pay a company like Reality Keys to arbitrate decisions where the data is not 100% clear.
"The way the Reality Keys model works, we can work with fairly sketchy data – as long as there's some way we can get the information. Then if somebody pays us for arbitration, it doesn't matter too much if we're pulling from a biased or inaccurate API originally."
The client software could be similar to products Reality Keys has already built for tracking personal exercise goals with RunKeeper and similar apps, he said.
Benefits to many
Smart contracts have the ability to offer protection to people who currently lack the time, financial resources or knowledge to access the traditional legal system for petty issues.
Given that this group can include everyone from an average consumer to professional sportspeople and other celebrities, the world may see a proliferation of both blockchain-based contracts and expert-administered oracle businesses in the near future.
NRL image via Shutterstock